In our book Digital to the Core, Graham and I identify three digital macro forces that are compelling businesses and whole industries to change. These technology related forces are powerful enough to be considered alongside others in business scenario and strategic planning – such as customer demographics and energy prices. The second of these forces is Compound Uncertainty.
Every industry will be digitally remastered as its products and services become more digital. For example cars are becoming more digital as they gain autonomous driving capabilities and some aspects of banking could be fundamentally redesigned around blockchain. For business strategists the key questions are: how will the big changes happen in an industry and when? It’s easy enough to accept that there might be a digital disruption within a decade or so, but to succeed in navigating that change you must know how and when to act. The problem is that digital business change usually creates lot of uncertainty – stemming from three sources.
- The capabilities and price / performance of technology itself.
- The rate at which regulators will adapt to the new product possibilities.
- The timing of changes to the culture – of customers and wider society, that will enable the new product capabilities to flourish.
Let’s illustrate with a contemporary example that could have an impact on multiple industries such as logistics, retail, emergency services and aviation: autonomous flying drones. A few weeks ago, Graham and I ran a couple of webinars attended by around 200 people. We asked “Do you believe e-commerce delivery by aerial drone will be operating in major cities around the world by 2020?”. 70% said yes – but are they right and should their CEOs therefore be moving quickly and decisively on that assumption? Most of the people answering that online poll were male technology industry professionals. Few were city planners, package logistics company managers, aviation regulators or mothers of small children.
First there is the technology question. When will aerial drones be capable of flying with sufficient precision, range, speed and in a wide variety of weather and visibility conditions, highly reliably and at a cost that will justify their commercial use? There are battery issues, electronic component issues, highly complex autonomous software design problems and physical engineering challenges. Amazon’s most recent drone design looks very different to its first – showing how fast this is all changing.
Second there is regulation. Different agencies will have a say. Of course the aviation authorities must decide about safe airspace use but what about city and local government – don’t they have rights too? Each country will take a different approach and will evolve its rules at a different pace. Some might try to delay drones because of heightened security fears. Others might choose to accelerate regulation to attract investment in a new industry.
Third there is culture. A recent article reminds us, drones sound like bees. They are not silent. Do we want that as a constant background noise in our environment? And though drones are being enabled with parachutes and other safety features – they cannot be entirely safe. Stories like this one, where a child lost an eye, could alarm people. Though you might like the idea of drone pizza delivery in principle – how happy would you be if the primary flight path of a local pizzeria, took most of its drones directly over your house at a height of just a couple of hundred feet?
We called our second force compound uncertainty because these elements of technology, regulation and culture tend to interact in ways that multiply the possible scenarios. For example the regulator might be more permissive if the emerging drone industry forms professional associations and standards bodies. Or our cultural objections might reduce when we see early examples of lives saved by drone based emergency blood-pack delivery. There might be complex trade-offs between noise reduction, height of flight-path and the distance that can be covered in a single battery charge. The list of interactions goes on.
In our book, we explain how leaders can think about these uncertainties and start to do better than their competitors at harnessing them to their own advantage. There is a triple tipping point to be found between the three sub-forces and the leader’s job is to judge or nudge it into place.
